Template-type: ReDIF-Paper 1.0  
Author-Name: Marta Gómez-Puig
Author-Email: marta.gomezpuig@ub.edu
Author-Workplace-Name: Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales
Author-Workplace-Homepage: https://www.ucm.es/icei/
Author-Name: Simón Sosvilla-Rivero
Author-Email: sosvilla@ccee.ucm.es
Author-Workplace-Name: Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales
Author-Workplace-Homepage: https://www.ucm.es/icei/
Title: Causality and contagion in peripheral EMU public debt markets: a dynamic approach
Abstract: Our research aims to analyze the causal relationships in the behavior of public debt issued by peripheral
	member countries of the European Economic and Monetary Union (EMU), with special emphasis on the
	recent episodes of crisis triggered in the eurozone sovereign debt markets since 2009. With this goal in
	mind, we make use of a database of daily frequency of yields on 10-year government bonds issued by five
	EMU countries (Greece, Ireland, Italy, Portugal and Spain), covering the entire history of the EMU from its
	inception on 1 January 1999 until 31 December 2010. In the first step, we explore the pair-wise causal relationship
	between yields, both for the whole sample and for changing subsamples of the data, in order to
	capture the possible time-varying causal relationship. This approach allows us to detect episodes of contagion
	between yields on bonds issued by different countries. In the second step, we study the determinants of
	these contagion episodes, analyzing the role played by different factors, paying special attention to instruments
	that capture the total national debt (domestic and foreign) in each country.
Abstract: Nuestra investigación tiene como objetivo analizar las relaciones causales en el comportamiento de la deuda
	pública emitida por países miembros periféricos de la Unión Económica y Monetaria (UEM), con especial
	énfasis en los recientes episodios de crisis desatados en los mercados de deuda soberana de la zona euro
	desde 2009. Con este objetivo, empleamos una base de datos de la frecuencia diaria de los rendimientos de
	los bonos gubernamentales a 10 años emitidos por cinco países de la UEM (Grecia, Irlanda, Italia, Portugal y
	España), que abarca toda la historia de la UEM desde su inicio el 1 de enero de 1999 al 31 diciembre de
	2010. En la primera etapa, se explora la relación causal por pares entre los rendimientos, tanto para la muestra
	completa y para submuestras cambiantes de los datos, con el fin de capturar posible relación causal en
	función del tiempo. Este enfoque nos permite detectar episodios de contagio entre los rendimientos de los
	bonos emitidos por países distintos. En el segundo paso, se estudian los factores determinantes de estos episodios
	de contagio, el análisis del papel desempeñado por diferentes factores, prestando especial atención a
	los instrumentos que capturan la deuda nacional total (doméstica y extranjera) en cada país.
Keywords: Sovereign bond yields, Causality, Time-varying contagion, Euro area, Peripheral EMU countries, Rendimientos bonos 
	soberanos, Causalidad, Contagio variable en el tiempo, Eurozona, Países periféricos UEM.
Creation-Date: 2011 
Note: This paper is based upon work supported by the Government of Spain and FEDER under grant number
	ECO2010-21787-C03-01, and ECO2008-05565. Marta Gómez-Puig wants to thank the Instituto de Estudios
	Fisccales for financial support and Simón Sosvilla-Rivero thanks the University of Barcelona & RFA-IREA for
	their hospitality. The authors also wish to thank Javier Llordén from the Euro Area Accounts and Economic
	Data Division of the European Central Bank for his valuable advice and help in the construction of the dataset
	on private debt-to-GDP by sector in each country, and Analistas Financieros Internacionales for kindly
	providing the credit rating dataset. All remaining errors are solely the authors’ responsibility.
Length: pages 38
Number: 1108
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Handle: RePEc:ucm:wpaper:1108